Docket No. 89738–Agenda 37–May 2001.

THE PEOPLE OF THE STATE OF ILLINOIS ex rel. JAMES E. RYAN, Attorney General of Illinois, Appellant, v. 

TELEMARKETING ASSOCIATES, INC., et al., Appellees.

Opinion filed November 21, 20--0-01.

	JUSTICE McMORROW delivered the opinion of the court:

	In an amended complaint, the Attorney General, representing

the people of this state, alleged that Telemarketing Associates,

Inc., and Armet, Inc., corporations which operate as professional

fund-raising services, and their director-owner, Richard Troia

(collectively, the defendants), committed fraud and breached their

fiduciary duty. The charged offenses were premised on the fact that

defendants retained 85% of charitable funds collected on behalf of

a charity, VietNow National Headquarters (VietNow), and, when

soliciting, failed to inform donors that only 15% of their

contribution would be distributed to the charity. The circuit court

dismissed the complaint, finding that no cause of action had been

stated under the facts alleged. The appellate court affirmed. 313 Ill.

App. 3d 559. We granted the Attorney General’s petition for leave

to appeal (see 177 Ill. 2d R. 315) and now affirm the judgment of

the appellate court.

BACKGROUND

	The circuit court dismissed the Attorney General’s amended

complaint after defendants brought a motion to dismiss pursuant to

section 2–615 of the Code of Civil Procedure (735 ILCS 5/2–615

(West 1998)). A motion to dismiss brought under section 2–615

admits all well-pled facts in the plaintiff’s complaint. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 490 (1996). Consequently, the following facts, taken from the Attorney General’s complaint, are

accepted as true.

	Telemarketing Associates, Inc. (Telemarketing), and Armet,

Inc. (Armet), are professional, for-profit fund-raising corporations

which are wholly owned and controlled by Richard Troia. In

accord with contracts negotiated with VietNow, an Illinois-based,

not-for-profit corporation registered as an Illinois charitable trust, Telemarketing and Armet solicited funds on behalf of VietNow

beginning in July 1987 and continuing into 1996. Pursuant to its

contracts with VietNow, Telemarketing retained 85% of the gross

collections in the State of Illinois “as its total compensation for all

efforts and costs associated with the Marketing Program.” Armet,

through Troia, brokered fund-raising contracts between VietNow

and various out-of-state, third-party solicitors. Pursuant to these

contracts, VietNow received 10% of the gross receipts for out-of-

state solicitations, while Armet, as the broker, received between

10% and 20% of these gross receipts.

	Annual financial reports submitted to the Attorney General, as

required by law (see 225 ILCS 460/4 (West 1998)), show that,

from July 1987 until the end of 1995, defendants’ fund-raising

efforts on behalf of VietNow resulted in collection of $7,127,851.

Of that amount, $6,073,887 was retained by defendants, netting

VietNow $1,053,964, an amount just under 15% of the gross

receipts.

	VietNow does not complain that it did not receive the amounts

for which it contracted, and there is no suggestion that defendants

have not fully complied with the terms of their contracts. Further,

VietNow has never expressed dissatisfaction with the fund-raising

services provided by defendants and there is no allegation that

defendants made affirmative misstatements to potential donors.

	In an initial complaint filed on May 30, 1991, the Attorney

General charged defendants with common law fraud and breach of

their duty as fiduciaries of charitable assets. The complaint alleged

that defendants, when making telephone solicitations on behalf of

VietNow, represented that funds donated would go to further

VietNow’s charitable purpose. However, according to the

Attorney General, because the fees charged by defendants for

conducting solicitation were “excessive in amount and an

unreasonable use and waste of charitable assets,” and because

defendants did not advise donors that only 15% of the funds raised

would be turned over to VietNow, defendants’ solicitations were

“knowingly deceptive and materially false” and constituted fraud

and a breach of their fiduciary duty. The Attorney General asked

the circuit court to surcharge the defendants for assets found to have been misspent or misused and to enjoin defendants from

further solicitation.

	The Attorney General amended his complaint on June 25,

1996, by adding paragraphs which alleged that defendants had

renewed their contracts with VietNow and, under the same terms

as before, had continued to solicit funds on behalf of VietNow into

1996. It was further alleged that defendants’ solicitations were in

violation of section 15(b)(5) of the Solicitations for Charity Act

(225 ILCS 460/15(b)(5) (West 1996)), which requires professional

fund-raisers to identify “fully and accurately” the purpose for which

funds are solicited. The Attorney General contended that

defendants violated this provision because they materially

misrepresented the purpose for which funds were being solicited by

telling contributors, either explicitly or implicitly, that funds

collected would be used to help veterans, and that these statements

were inherently false and misleading in light of the high percentage

of funds retained by the defendants.

	The complaint further alleged that defendants, by failing to

reveal to donors the percentage of the contribution which would

actually go to the charity, obtained money from donors under false

pretenses. The same conduct was also alleged to constitute fraud

under the Illinois Consumer Fraud and Deceptive Business

Practices Act (815 ILCS 505/1 et seq. (West 1996)) and under section 2 of the Uniform Deceptive Trade Practices Act (815 ILCS

510/2 (West 1996)). The complaint requested all available

remedies and penalties authorized by section 9 of the Solicitation

for Charity Act (225 ILCS 460/9 (West 1998)), including an

injunction prohibiting defendants from conducting any future fund-

raising services and forfeiture of their collected fees.

	On September 6, 1996, defendants filed a section 2–615

motion to dismiss, arguing that charitable solicitations were

protected speech under the first amendment. Defendants contended

that, pursuant to Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781, 101 L. Ed. 2d 669, 108 S. Ct. 2667 (1988), a claim of fraud could not be maintained when the

basis for the complaint was the percentage of proceeds retained by

the fund-raisers and the failure to volunteer information concerning

the amount of the proceeds that would go to the charity.

	The trial court granted the motion to dismiss, but allowed the

Attorney General to amend his complaint. On December 4, 1996,

the Attorney General filed an amended complaint. In addition to

the previous allegations, the Attorney General now alleged that

defendants’ retention of 85% of the gross proceeds, although

contracted for and agreed to by VietNow, constituted fraud

because defendants retained donor lists from year to year and,

accordingly, should have incurred decreased administrative costs.

Thus, it was alleged, defendants’ retention of donor lists was

evidence that defendants’ fee was not justified by high

administrative costs.

	Defendants again filed a section 2–615 motion to dismiss,

which was granted. The dismissal was affirmed on appeal. 313 Ill.

App. 3d 559. This court granted the Attorney General’s petition

for leave to appeal. 177 Ill. 2d R. 315.

ANALYSIS

	As noted above, the circuit court dismissed the Attorney

General’s complaint after defendants brought a section 2–615

motion to dismiss. A section 2–615 motion to dismiss challenges

the legal sufficiency of the complaint. Urbaitis v. Commonwealth Edison, 143 Ill. 2d 458, 475 (1991). When reviewing a section 2–615 dismissal, the reviewing court must determine whether the

allegations, when construed in the light most favorable to the

plaintiff, are sufficient to establish a cause of action upon which

relief may be granted. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 490 (1996). Dismissal will be held proper only if it clearly

appears that no set of facts can be proved under the pleadings

which will entitle the plaintiff to recover. Bryson v. News America Publications, Inc., 174 Ill. 2d 77, 86-87 (1996). We review de novo a section 2–615 motion to dismiss. Neade v. Portes, 193 Ill. 2d 433, 439 (2000); Abbasi v. Paraskevoulakos, 187 Ill. 2d 386, 391 (1999).

	The Attorney General argues that the circuit court erred in

dismissing his amended complaint. He contends that the complaint

is legally sufficient because it sets forth all of the elements

necessary to state a valid cause of action for common law fraud. According to the Attorney General, it is a material

misrepresentation for defendants to tell prospective donors that

funds solicited on behalf of VietNow are to be used for a charitable

purpose when, in fact, defendants retain 85% of the funds solicited

and fail to reveal that fact to potential donors at the point of

solicitation.

	The Attorney General further contends that the alleged

misrepresentations also constitute constructive fraud and breach of

fiduciary duty because the defendants’ retention of 85% of the

solicited proceeds, even if there was no intent to deceive, is

“prejudicial to the public welfare” and a breach of the public’s trust

and confidence in charitable solicitation. The Attorney General

admits that, ordinarily, donors anticipate that a certain amount of

their contributions will be applied to “overhead.” However, he

claims that retention of 85% of donated funds goes well beyond

any reasonable expectation of the public. As support for this

position, the Attorney General has attached to his complaint the

affidavits of 44 VietNow donors who assert that they would not

have given money to the charity had they known how little of their

donation was to be directed to the intended cause.

	The Attorney General acknowledges the first amendment

precedent relied upon by the circuit and appellate courts.

Nevertheless, he claims the representations made by the defendants

are actionable, notwithstanding the protections afforded charitable

solicitations by the first amendment. We disagree.

	We begin by examining the scope of first amendment

guarantees afforded charitable solicitations. We use as guidance

three decisions of the United States Supreme Court, Village of Schaumburg v. Citizens For a Better Environment, 444 U.S. 620, 63 L. Ed. 2d 73, 100 S. Ct. 826 (1980), Secretary of State v. Joseph H. Munson Co., 467 U. S. 947, 81 L. Ed. 2d 786, 104 S. Ct. 2839 (1984), and Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781, 101 L. Ed. 2d 669, 108 S. Ct. 2667 (1988).

	In Schaumburg, a not-for-profit corporation properly registered as a charitable trust under Illinois law was denied a

permit to solicit door-to-door by the Village of Schaumburg

pursuant to a Village ordinance which required permit applicants to provide “[s]atisfactory proof that at least seventy-five percent of

the proceeds of such solicitations will be used directly for the

charitable purpose of the organization.” The charitable corporation

sued the Village in federal district court, arguing that the ordinance

violated the first and fourteenth amendments. The charity was

granted summary judgment and the court of appeals affirmed.

	On review, the United States Supreme Court, after examining

prior authority, concluded that charitable appeals for funds fall

within the protection of the first amendment because “solicitation

is characteristically intertwined with informative and perhaps

persuasive speech seeking support for particular causes or for

particular views on economic, political, or social issues, and ***

that without solicitation the flow of such information and advocacy

would likely cease.” Schaumburg, 444 U.S. at 632, 63 L. Ed. 2d at 84, 100 S. Ct. at 834. Accordingly, the Court found that the

75% limitation in the Village’s ordinance was “a direct and

substantial limitation on protected activity that cannot be sustained

unless it serves a sufficiently strong, subordinating interest that the

Village is entitled to protect.” Schaumburg, 444 U. S at 636, 63 L. Ed. 2d at 87, 100 S. Ct. at 836. The Court then rejected the

Village’s contention that its ordinance was justified because it was

substantially related to the important governmental interests in

preventing fraud, crime, and undue annoyance. Although the Court

acknowledged that preventing fraud was indeed an important

interest, the Court held that the ordinance was not narrowly drawn

so as not to interfere with first amendment freedoms. Schaumburg, 444 U.S. at 636-37, 63 L. Ed. 2d at 87-88, 100 S. Ct. at 836. The

ordinance only “peripherally promoted” the asserted governmental

interest of protecting against fraud because, as the Court observed,

costs incurred by charitable organizations conducting fund-raising

campaigns can vary dramatically depending on a wide range of

variables, some of which are beyond the control of the

organization. Schaumburg, 444 U.S. at 6367 n.10, 63 L. Ed. 2d at 87 n.10, 100 S. Ct. at 836 n.10. Thus, the Court found there was

no rational reason to conclude that a charity which uses more than

25% of the funds it collects on fund-raising, salaries, and overhead

should automatically be labeled fraudulent. Schaumburg, 444 U.S. at 636-37, 63 L. Ed. 2d at 87, 100 S. Ct. at 836.

	Four years after rendering its decision in Schaumburg, the Supreme Court was asked to consider the constitutionality of a

Maryland statute which prohibited charitable organizations from

paying or agreeing to pay “ ‘as expenses in connection with any

fund-raising activity a total amount in excess of 25 percent of the

total gross income raised or received by reason of the fund-raising

activity.’ ” Secretary of State v. Joseph H. Munson Co., 467 U.S. 947, 950 n.2, 81 L. Ed. 2d 786, ___792 n.2, 104 S. Ct. 2839, ___2843 n.2

(1984), quoting Md. Code Ann., Bus. Reg. §103A (1982). The

statute contained a provision which authorized a waiver of the 25%

limitation “ ‘in those instances where the 25% limitation would

effectively prevent a charitable organization from raising

contributions.’ ”

	Reaffirming its holding in Schaumburg, the Munson Court held that the Maryland percentage-based statute, like the ordinance

in Schaumburg, substantially restricted a protected first amendment activity and that “the means chosen to accomplish the State’s

objectives are too imprecise, so that in all its applications the

statute creates an unnecessary risk of chilling free speech ***.”

Munson, 467 U.S. at 968, 81 L. Ed. 2d at 803, 104 S. Ct. at 2853. Percentage-based limitations, the Court reiterated, are insufficiently

related to the governmental interest in preventing fraud.

Furthermore, the constitutional deficiencies of the percentage-

based limitation could not be remedied by the addition of a waiver

provision which granted governmental authorities the discretion to

dispense with the percentage limitation upon a showing of financial

necessity. Munson, 467 U.S. at 962, 81 L. Ed. 2d at 799-800, 104 S. Ct. at 2850. The Munson Court explained:

		“The flaw in the statute is not simply that it includes within

its sweep some impermissible applications, but that in all

its applications it operates on a fundamentally mistaken

premise that high solicitation costs are an accurate

measure of fraud. That the statute in some of its

applications actually prevents the misdirection of funds

from the organization’s purported charitable goal is little

more than fortuitous. It is equally likely that the statute

will restrict First Amendment activity that results in high

costs but is itself a part of the charity’s goal or that is simply attributable to the fact that the charity’s cause

proves to be unpopular. On the other hand, if an

organization indulges in fraud, there is nothing in the

percentage limitation that prevents it from misdirecting

funds. In either event, the percentage limitation, though

restricting solicitation costs, will have done nothing to

prevent fraud.” Munson, 467 U.S. at 966-67, 81 L. Ed. 2d at 802, 104 S. Ct. at 2852.

	Despite Munson’s condemnation of percentage-based limitations on charitable solicitation, the Supreme Court was called

upon just four years later to decide whether another percentage-

based regulation, which had recently been added to the North

Carolina Charitable Solicitations Act, suffered from the same

constitutional deficiencies as the laws struck down in Schaumburg and Munson. See Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781, 101 L. Ed. 2d 669, 108 S. Ct. 2667 (1988). The North Carolina statute in Riley differed from the laws in Schaumburg and Munson in that it regulated professional for-profit fund-raisers rather than the charitable organizations

themselves.

	Responding to a study which showed that professional fund-

raisers typically retained fees “well over 50% of the gross revenues

collected in charitable solicitation drives,” North Carolina enacted

a statute which prohibited fund-raisers from charging an

“unreasonable” or “excessive” fee. Riley, 487 U.S. at 784, 101 L. Ed. 2d at 681, 108 S. Ct. at 2761. A three-tiered, percentage-based

schedule was used to define the “reasonable fee” that a professional

fund-raiser could charge. Specifically, a fund-raiser could charge

up to 20% of its gross receipts without running afoul of the

“reasonableness” requirement. A fund-raising fee between 20% and

35% of gross receipts, however, was presumptively unreasonable

and excessive “if the party challenging the fund-raising fee also

proves that the solicitation does not involve the dissemination of

information, discussion, or advocacy relating to public issues as

directed by the person established for a charitable purpose which

is to benefit from the solicitation.” Finally, the statute provided

that, if the fund-raising fee was 35% or more of the gross receipts,

the fund-raiser would carry the burden of proving that the fee was “necessary.” Necessity, according to the statute, could be proved

by evidence (1) that the fee was required due to the dissemination

of information, discussion or advocacy for the charitable purpose,

or (2) that the charity’s ability to solicit would otherwise be

“significantly diminished.” The statute also required professional

fund-raisers to disclose to potential donors, at the point of

solicitation, the “average percentage of gross receipts actually

turned over to charities by the fundraiser for all charitable

solicitations conducted in North Carolina within the previous 12

months.” Riley, 487 U.S. at 786, 101 L. Ed. 2d at 682, 108 S. Ct. at 2672.

	After close examination of the statute, the Riley Court ruled that the percentage-based definition of an “unreasonable” fee could

not pass constitutional muster because “using percentages to

decide the legality of the fundraiser’s fee is not narrowly tailored

to the State’s interest in preventing fraud.” Riley, 487 U.S. at 789, 101 L. Ed. 2d at 684, 108 S. Ct. at 2673. The Court explained that

the statute’s defect was that it defined an “unreasonable” and

“excessive” fee according to the percentage of total revenues

collected, “[d]espite our clear holding in Munson that there is no nexus between the percentage of funds retained by the fundraiser

and the likelihood that the solicitation is fraudulent.” Riley, 487 U.S. at 793, 101 L. Ed. 2d at 687, 108 S. Ct. at 2675.

	Moreover, the Court found the North Carolina statute suffered

from a “more fundament flaw” than the one in Munson–it placed fund-raisers at risk of having to rebut the presumption of

unreasonableness, case by case, based on nothing more than “a

loose inference that the fee might be too high.” Riley, 487 U.S. at 793, 101 L. Ed. 2d at 687, 108 S. Ct. at 2676. The Court found it

constitutionally unacceptable for fund-raisers to have to wait until

“reasonable” fees were “judicially defined over the years.” Riley, 487 U.S. at 793, 101 L. Ed. 2d at 687, 108 S. Ct. at 2676. In the

interim, the Court held, fund-raisers would be unable to speak with

any level of security and would run the risk of incurring litigation

costs, as well as the possibility of a mistaken adverse ruling. Riley, 487 U.S. at 793-94, 101 L. Ed. 2d at 6887, 108 S. Ct. at 2676. As

a result, fund-raisers would be less inclined to contract with many

charitable organizations, especially less popular ones, and the ability of charities to speak would be substantially diminished.

Riley, 487 U.S. at 794, 101 L. Ed. 2d at 688, 108 S. Ct. at 2676.

	 The Riley Court also found constitutionally offensive the statutory provision which mandated fund-raisers to reveal to

potential donors, at the point of solicitation, the amount of

charitable proceeds turned over to a charity. The provision, the

Court held, was a content-based regulation of protected speech

which was unduly burdensome and not narrowly tailored. As the

Court explained, a compelled disclosure requirement presumes,

incorrectly, that a charity derives no benefit from funds collected

but not disbursed to it. Further, a disclosure requirement would

“almost certainly hamper the legitimate efforts of professional

fundraisers to raise money for the charities they represent.” Riley, 487 U.S. at 799, 101 L. Ed. 2d at 691, 108 S. Ct. at 2679.

	Keeping in mind the holdings of Schaumburg, Munson, and Riley, we turn to the case at bar. The Attorney General contends that the present case is distinguishable from Riley and its predecessors because here the problem of fraud is being attacked,

not through the application of “broad prophylactic” ordinances or

statutes affecting all fund-raisers (see Schaumburg, 444 U.S. at 637, 63 L. Ed. 2d at 88, 100 S. Ct. at 836), but through the

enforcement of the state’s antifraud laws against specific

defendants for “specific instances of deliberate deception.” See

Riley, 487 U.S. at 803, 101 L. Ed. 2d at 694, 108 S. Ct. at 2681 (Scalia, J., concurring). Thus, the Attorney General reasons, his

complaint utilizes the “less intrusive” measures for attacking fraud

suggested by the Schaumburg Court. Schaumburg, 444 U.S. at 637, 63 L. Ed. 2d at 88, 100 S. Ct. at 836. The Attorney General

argues:

		“The complaint [at issue in this case] is the constitutional

alternative to the prohibitive legislation at issue in

Schaumburg and the burden-shifting legislation at issue in Munson and Riley. Here, the people seek to have the judicial process determine, under the specific facts of this

distinct case, whether these particular defendants

defrauded the public and violated their fiduciary duties as

holders of charitable funds.”

	The Attorney General’s argument suggests, in part, that the

present action is a “less intrusive” means of combating fund-raising

fraud because it is an instance of individual litigation, i.e., a single complaint, and not a broad, regulatory statute. We reject this

contention. When the Supreme Court spoke of the government’s

right to pursue “less intrusive” measures, it plainly meant that the

government retained the right to regulate the conduct of fund-

raisers in a manner which was “less intrusive” of their constitutional rights. The present action is not “less intrusive” within the meaning of the Supreme Court’s holdings simply

because it is an instance of individual litigation.

	Thus, in this case, to determine whether the Attorney

General’s complaint is a “less intrusive” means of regulating

defendants’ speech and, hence, permitted by Riley and its predecessors, we must examine the allegations of the complaint

and decide whether those allegations offend the first amendment

principles set forth in the Supreme Court decisions. Stated

otherwise, we must determine whether the Attorney General’s

complaint operates to limit defendants’ ability to engage in

solicitation–an activity protected by the first amendment–in a

manner found constitutionally impermissible by the Supreme Court

in Schaumburg, Munson and Riley. We conclude that it does.

	The Attorney General’s complaint seeks to enjoin defendants

from conducting any future fund-raising activities based on

allegations that defendants, when soliciting on behalf of VietNow,

committed “fraud” because they made “false statements”

concerning the purpose for which funds were being solicited.

However, the statements made by defendants during solicitation

are alleged to be “false” only because defendants retained 85% of

the gross receipts and failed to disclose this information to donors.

Thus, the Attorney General’s complaint is, in essence, an attempt

to regulate the defendants’ ability to engage in a protected activity

based upon a percentage-rate limitation. This is the same

regulatory principle that was rejected in Schaumburg, Munson and Riley.

	As the Supreme Court has pointed out, high solicitation costs,

and a solicitor’s high rate of retaining receipts, can be attributable

to a number of factors. Certain types of fund-raising campaigns, for example, include a wide range of activities that must be paid for.

The present case illustrates this point. The Attorney General has

attached defendants’ contracts with VietNow to his complaint and

made them a part of the pleadings. These contracts show that, in

exchange for its fee, Telemarketing agreed to supply and pay the

salaries of all marketing personnel, as well as pay all costs for an

office and phones. In addition, Telemarketing agreed to be

responsible for producing, publishing, editing and paying all costs

for the annual publication of more than 2,000 copies of an

advertising magazine which would “increase community awareness

of [VietNow].” The contract required Telemarketing to conduct

“an efficient and professional marketing program, promote

goodwill on behalf of [VietNow], and enhance good public

relations.”

	Contracts between VietNow and Armet provided that third-

party professional fund-raisers would conduct an advertising and

public awareness campaign in conjunction with the sale of

advertizing in a quarterly publication. The quarterly publication

would be produced by Armet. At least 30% of the quarterly

publication was to be devoted to editorial content provided by

VietNow. Armet also agreed to maintain a live, nationwide, toll-

free telephone number which individuals could call to obtain

information regarding VietNow.

	Defendants in this case were contracted to perform a wide

range of activities on behalf of VietNow, all of which were to be

paid for out of the solicited funds. This example illustrates the

principle that, because of the many different factors that may

contribute to high solicitation costs, it is incorrect to assume, as a

matter of law, that there is a nexus between high solicitation costs

and fraud. See Riley, 487 U.S. at 793, 101 L. Ed. 2d at 687, 108 S. Ct. at 2675.

	Further, and more fundamentally, it is incorrect to presume

that there is nexus between high solicitation costs and fraud

because, as the Supreme Court has explained, the percentage of

proceeds turned over to a charity is not an accurate measure of the

amount of funds used “for” a charitable purpose. See Munson, 467 U.S. at 967 n.16, 81 L. Ed. 2d at 802 n.16, 104 S. Ct. at 2852

n.16. Charities often reap nonmonetary benefits by having their message disbursed by the solicitation process. In fact, as the

Schaumburg Court observed, the solicitation may be so intertwined with informative and persuasive speech that the solicitation itself

is part of the charitable purpose. This point is aptly demonstrated

in the case at bar. The defendants’ contracts with VietNow

required defendants to produce publications that “increased

community awareness” about VietNow. Defendants were also

directed to conduct their solicitations in a manner that would

“promote goodwill” on behalf of VietNow. The fund-raising

services defendant provided, therefore, were inextricably

intertwined with the advancement of VietNow’s philosophy and

purpose. Moreover, because the solicitation process is so

enmeshed with the charitable purpose, it is irrelevant whether or

not defendants’ administrative costs were reduced, as the Attorney

General alleged, because defendants retained donor lists from year

to year.

	For similar reasons, fraud cannot be defined in such a way that

it places on solicitors the affirmative duty to disclose to potential

donors, at the point of solicitation, the net proceeds to be returned

to the charity. Compelled disclosure, as the Riley Court held, is based on a presumption that the net proceeds returned to a charity

are the only benefit that a charity derives from solicitation. This

presumption is incorrect. As discussed above, often a large portion

of the funds solicited are used “for a charitable purpose” although

only a fraction of the proceeds are actually turned over to the

charity. The net proceeds returned to a charity do not accurately

reflect the amount of funds which go toward the charitable purpose

because that figure fails to take into consideration the charity’s

nonmonetary objectives, such as dissemination of information and

advocacy, which are by-products of the solicitation that cannot be

quantified. Consequently, any rule of law which burdens speech by

requiring solicitors to make statistical disclosures, at the point of

solicitation, is not narrowly tailored to the state’s asserted interest

of protecting the public from being misled about the way their

charitable dollars are being spent. See Riley, 487 U.S. at 798-99, 101 L. Ed. 2d at 690-91, 108 S. Ct. at 2678-79.

	We note, too, that professional fund-raisers who are

telemarketers, as the defendants in this case, are particularly disadvantaged by a disclosure requirement. As the Riley Court observed, “if the potential donor is unhappy with the disclosed

percentage, the fundraiser will not likely be given a chance to

explain the figure; the disclosure will be the last words spoken as

the donor *** hangs up the phone.” Riley, 487 U.S. at 800, 101 L. Ed. 2d at 691, 108 S. Ct. at 2679.

	Finally, we note that, although the Attorney General’s

complaint is aimed at regulating the fund-raising efforts of the

defendants, this case has far-reaching implications for all fund-

raisers. If a complaint such as the one at issue in this case was

allowed to proceed, all fund-raisers in this state would have the

burden of defending the reasonableness of their fees, on a case-by-

case basis, whenever in the Attorney General’s judgment the public

was being deceived about the charitable nature of a fund-raising

campaign because the fund-raiser’s fee was too high. Fund-raisers,

therefore, would be at a constant risk of incurring litigation costs,

as well as civil and criminal penalties, which could produce a

substantial chilling effect on protected speech, based on nothing

more than a “loose inference that the fee might be too high.” See Riley, 487 U.S. at 793, 101 L. Ed. 2d at 687, 108 S. Ct. at 2676. Such a procedure cannot be condoned.

	In light of the foregoing, we conclude that the Attorney

General’s complaint suffers from the same “fundamental flaw”

described by the Supreme Court in Schaumburg, Munson and Riley. The complaint incorrectly presumes that there is a nexus between high solicitation costs and fraud and attempts to regulate

defendant’s constitutionally protected solicitations on that basis.

Contrary to the Attorney General’s contentions, the complaint is

not a “less intrusive” means of regulation but is, instead,

indistinguishable from the regulatory measures struck down in

Schaumburg, Munson and Riley. We conclude, therefore, that the Attorney General’s complaint is prohibited under first amendment

principles and was properly dismissed.

	We are mindful of the opportunity for public misunderstanding

and the potential for donor confusion which may be presented with

fund-raising solicitations of the sort involved in the case at bar.

However, the United States Supreme Court decisions in Riley, Munson and Schaumburg compel us to reach the decision we announce today.

CONCLUSION

	The Attorney General’s complaint is not legally sufficient. It

does not state a cause of action for fraud or breach of fiduciary

duty. Although the Attorney General purports to be charging

defendants with specific instances of misrepresentation, his

complaint is, at its core, a constitutionally impermissible

percentage-based limitation on defendants’ ability to engage in a

protected activity. As such, the complaint is constitutionally

deficient pursuant to Schaumburg, Munson, and Riley. Accordingly, we affirm the judgment of the appellate court, which

affirmed the dismissal of the Attorney General’s complaint.

Affirmed.